Fiscal Implications of Trade Liberalization

48 Pages Posted: 15 Feb 2006

Date Written: May 1995


This paper examines the relationship between trade liberalization and the budget deficit, which depends on the specifics of country`s economic structure, and the trade regime which is being liberalized. It relates some popular but incomplete approaches to assessing this issue (such as analysis of the foreign exchange budget) to a more comprehensive approach using an applied general equilibrium model. The argument is illustrated using data from the most recent of a sequence of abortive planned liberalizations in Kenya, as well as a number of stylized illustrations. The conclusions are not only that liberalization may be budget enhancing, but that in certain circumstances it may be strongly so.

JEL Classification: D58, E63, F13, F41

Suggested Citation

Bevan, David, Fiscal Implications of Trade Liberalization (May 1995). IMF Working Paper No. 95/50, Available at SSRN:

David Bevan (Contact Author)

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

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